Daily Currency Update

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The Loonie and other commodity currencies bounce along with crude oil.

CAD - Canadian Dollar

The Loonie has increased 0.5 percent versus the Greenback, 0.53 versus the Japanese Yen, and 0.44 versus the Euro. The catalyst was the bounce in crude oil and its price stabilizing at multi-year lows as President Donald Trump ordered the navy to destroy any Iranian gunboats that harass American ships at sea. Trump issued the warning in a tweet early today. However, this type of news is part of the noise. The fundamentals brought by sluggish growth and Covid 19 are the main catalysts for the Loonie longer-term.

On a more fundamental note, Canadian inflation fell, sliding from above target to below 1 percent in a single month. The Canadian Consumer Price Index (CPI) fell 0.6 percent in March in the first month of the North American shutdowns. Adjusted for seasonal factors, the CPI fell 0.9 percent month to month, which is the largest monthly drop since its inception in 1992. The CPI year to year only increased 0.9 percent versus the 1.1 percent expected.

Key Movers

The Greenback trades slightly lower in a quiet trading environment with little fresh news and global and North American equity stocks posting gains. The U.S. dollar only outperforms the Norwegian Krone, which is falling for a third day. The Euro and Pound increase 0.05 and 0.33 percent respectively.

The U.S. senate passed another $484 billion economic support bill to top up a depleted program for aid to small businesses, hospitals, and testing. It is due for a vote in the House later this week, which would allow members to vote on the package without meeting in person.

The Pound has risen 0.27 percent versus the U.S. dollar, trading at 1.2321. The Pound has recovered from a two-day slide amid dollar weakness. The USD/JPY pair is trading flat and it remains firmly in the 107-108 range.

The most important FX pair, the EUR/USD, is up 0.05 percent at 1.0860. ECB Governing Council Member Olli Rehn said an EU budget could be a solution to the impacts of Covid 19 , not joint borrowing. Furthermore ECB policy makers will hold a call today where they may discuss whether to accept junk-rated debt as collateral from lenders. Risk premiums in the Euro zone continue to widen as Italy’s Prime Minister Giuseppe Conte appeared to give up his fight for joint debt issues ahead of a Thursday EU summit. At the same time, oversaturated long positioning leaves the Euro at risk for a covering move that ultimately pushes the Euro lower.

By the time the strictest measures are lifted regarding Covid 19, the largest economies in the Euro area will have spent almost two months in lockdown. Early evidence suggests that the economic costs are huge.

Expected Ranges

USD/CAD: 1.4109 - 1.4169 ▼

EUR/CAD: 1.5289 - 1.5375 ▼

GBP/CAD: 1.7335 - 1.7517 ▼

AUD/CAD: 0.8890 - 0.9000 ▲

NZD/CAD: 0.8382 - 0.8448 ▼

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